Good News For Roche, Excellent News For Immunogen

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Earlier today, Roche announced positive results from a phase III study evaluating its breast cancer blockbuster, Herceptin, in gastric cancer. According to Roche, the addition of Herceptin to standard chemotherapy “significantly prolonged” overall survival of gastric cancer patients. From a medical perspective, this trial is a great achievement considering the severe shortage of effective treatments for gastric cancer. This is also the first success Herceptin has outside of breast cancer, where it quickly became a cornerstone treatment.

Similarly to the case in breast cancer, the gastric cancer trial (The Toga study) included only patients whose tumors express Herceptin’s target, the Her-2 protein. The idea of distinguishing between patients based on the biology of their tumors has become the standard in many cancer trials, particularly when targeted therapies such as Herceptin are involved. The Toga trial further validates this approach, and proves yet again that homing in on a genetically defined subgroup of patients may decrease a drug’s addressable market, but increases chances of showing a real benefit.  

This trial is very good news for Roche, which just last week closed the deal to acquire 44% of Genentech (DNA) that it does not already own for $95 a share.  Although gastric cancer is not as prevalent in developed countries as breast cancer, it represents a large market with high demand for new treatments. In particular, to date, no targeted agents have been approved for the treatment of the disease, leaving the stage to a handful of chemotherapy regimens. Herceptin may be the first targeted agent to become approved in gastric cancer, but its exclusivity might not last for long, as results from several highly anticipated phase III trials are expected in the coming 12 months.  Most notable is a trial evaluating Avastin with chemotherapy (AVAGAST), which, in contrast to the Herceptin trial, does not seem to use special selection criteria.

Gastric cancer is the second leading cause of cancer related death in the world with developing countries accounting for approximately 70% of cases. In developed countries, almost 340 thousand people are diagnosed with the disease every year. In the US, gastric cancer is less common, whereas in Japan, gastric cancer occurs nearly five times more frequently, which makes Japan the most important market for gastric cancer. In an analysis conducted last year as part of the screening process for the Toga trial, investigators found that approximately 22% of patients with gastric cancer express Her-2. Roche’s press release implies that actual number may be somewhat lower, but still, the number of Herceptin eligible gastric cancer patients seems substantial.  To put things in perspective, in 2007, 680 thousand patients in developed countries were diagnosed with breast cancer, 150 thousand of whom had Her-2 positive tumors. Herceptin’s worldwide sales from the breast cancer market were over $4B last year.

Roche still has not published any concrete data from the Toga trial, but it did say that the addition of Herceptin led to a significant difference in overall survival. It still remains to be seen how meaningful the increase was although in gastric cancer, the bar is set pretty low, as patients typically survive only 9-10 months after first line treatment. Therefore, even a month difference could be enough to get Herceptin approved for this indication. In addition, the current analysis includes data for just over half of the 594 patients enrolled to the study, and even if final results are positive, approval is never guaranteed.

What does this all mean for Immunogen (IMGN)? In the near term, not much, however, in the long run, it could have a meaningful impact on the company. Immunogen helped Genentech developing T-DM1, an “armed” version of Herceptin, by conjugating it to a toxic payload. As I discussed in previous articles (here and here ), T-DM1 seems highly effective in breast cancer patients who progressed while on Herceptin. Because until now, Herceptin was approved only for breast cancer patients, T-DM1 is also being evaluated for this indication only. If Herceptin gets approved for gastric cancer, Roche may want to explore T-DM1’s utility in this disease as well, which will open another blockbuster opportunity for T-DM1. In a previous article, I speculated that T-DM1 may also be effective outside of breast cancer solely based on the fact that expression of HER-2 was observed in several tumors including gastric and ovarian cancer. Now that Herceptin was shown to have some sort of activity in gastric cancer, it will be only natural for Roche to evaluate T-DM1 in this indication.

Immunogen and T-DM1 are now at the mercy of Roche, who might not be willing to advance T-DM1 as aggressively as Genentech. In order not to cannibalize Herceptin’s market share, Roche may choose to wait until Herceptin becomes an established agent in gastric cancer and use T-DM1 as a second line treatment in patients who progressed on or do not respond to Herceptin. Regardless of Roche’s plans and actual results from the Toga study, today’s announcement is an extremely positive development for Herceptin and consequently for T-DM1 and Immunogen. No wonder the stock, which just touched a new 52-week high, is the best performer in our biotech portfolio. 


                                              Portfolio Holdings as of March 18th, 2009


4 thoughts on “Good News For Roche, Excellent News For Immunogen

  1. I have so far bought sgen and crx….wish I had bought imgn when I had the chance.

    What would you say are the 3 best buys in your portfolio?

    I really like reading your objective opinions.


  2. I should have bought imgn when it was close to 5 dollars just a few weeks ago and now is up 40% since then.
    How much limited upside is there? What is your price target? When does imgn become too expensive?

    I bought sgen when you recommended it and I am up nearly 40% since you recommended about 3 weeks ago!


  3. Looking at T-DM1’s overall potential, IMGN isn’t too expensive but it certainly isn’t cheap. Now it all depends on ASCO. If Genentech publishes good data from its 2nd+ line trial IMGN could go higher but if not, a correction will have to occur. Until then, it’s impossible to predict the stock behavior imo. I have to admit that we are considering selling some IMGN in the biotech portfolio.
    It’s funny you mention SGEN because it also shows that these companies, no matter how promising can get pretty volatile and it’s up to us to take advantage of this volatility.



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